Sunday, June 12, 2011

Who's funding B2B start-ups?

Join the IPO Party (Eric Markowitz,Inc.com) is a great article about a resurgence in IPOs that feeds into my previous blog about how IPOs were not dead... Except that the IPO and venture capital focus appears to be increasing for B2C (business to consumer) startups, and decreasing for B2B (business to business) startups. Here's an excerpt from the article:

--------------------------------------------------------------------Who's funding B2B start-ups? No one, it seems.Good luck getting funding for your start-up if your business model targets other businesses—you'll need it.According toThe Wall Street Journal, start-ups targeting other businesses as their main customers are struggling to find venture dollars. "The shift away from business-oriented technology start-ups has been gathering steam over the past few years,"The Journalnotes. "Venture investment into such companies was $11.9 billion in 2010, down 35 percent from $18.4 billion in 2006." Funding for start-ups that cater to consumers, well, that's another story completely. In the first three months of this 2011, "venture-capital investment in consumer tech companies nearly tripled to $874 million from $310 million a year earlier…The disparity is stark."

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Ok, the above excerpted assessment could be read another way. The B2B investment size is still multiples larger than the B2C (if you annualize the $874 million, which of course may not be accurate but will suffice for this example, the B2C annual market for 2011 will be $3.5 billion). So, unlike the above excerpt implies, B2B investment is not dead, just lower. You will note that the new investment in B2C has not replaced the decrease in investment in B2B. So keep your chin up, B2B start-ups (tech and related, that is). Venture capitalists are still interested in you. Although they just may get distracted by the flashy B2C startup tech companies, they continue to show you love.